Focus Story: 100% Loyal
 Companies
Siebel Systems
Nucleus Research
Product
Siebel CRM
Marketing Overview
During the late 90s customer relationship management software (CRM) was one of software's hottest new categories. CRM products are bulked-up versions of sales contact managers such as ACT! and GoldMine that became popular in the late 80s and early 90s. CRM packages are designed to move beyond managing sales prospects and, in theory, offer companies the ability to manage every aspect of their customer relationships, from buying through returns.
In the late 90s, CRM's 800lb gorilla was Siebel. Founded by Tom Siebel in 1993, the company by 2000 was approximately $1.25B and the dominant player in various segments of the CRM market. As Siebel grew, both the company and its founder and CEO developed a reputation as being arrogant, inaccessible to the press, and difficult to deal with.
Like enterprise resource planning (ERP) products, a successful CRM deployment requires a company to make a profound commitment to reengineering its internal business computing platforms, practices, and policies to insure eventual success. Tremendous amounts of time and resources have to be dedicated to customizing the software, testing it, deploying, and retraining company personnel to use the new system. The process is never smooth and can often be snarled by internal politics, software deficiencies, and implementation costs that can quickly spiral past initial optimistic estimates.
Making things worse is the fact that despite the claims of the industry and the availability of CRM "suites" which supposedly integrate disparate customer databases across the entire enterprise, the truth is that this integration is often more real in the minds of CRM software vendors than on their customer's computer systems. As an August 26, 2003 report by DM Direct magazine pointed out "few CRM suite suppliers package integration between their own campaign management offerings and their own contact centre, e-commerce or customer self-service applications!" As a result of these issues, the entire CRM category came into some disrepute as "shelfware," a category of software that companies, bought, attempted to deploy, gave up on, and then relegated to an inglorious position tucked away on some IT worker's shelf.
As the dot.com bubble burst, Siebel, along with many other firms, suffered as shrinking IT budgets and a tighter focus on measurable ROI from technology washed over the software industry. Siebel did not escape the tide. By 2002 the company's growth had slowed sharply and the CRM publisher experienced an 18% drop in third-quarter revenue and a loss of $92M, in contrast with a profit of $35M during the same period in 2001.
Siebel's PR chickens came home to roost when in June of 2002 a small, obscure research firm, Nucleus Research, thrust itself into the limelight when it decided to survey 66 customers Siebel had posted on its site as marquis reference accounts. Of these 66, 23 responded to the Nucleus questionnaire and, to Nucleus' [stated] surprise, the survey found that 61% of these accounts did not believe that they had achieved any measurable ROI on their investment in Siebel software after two years. (The average sale to this group was approximately $6.6M over a three-year period.)
The Nucleus survey also stated that:
- 65% of Siebel's customers had problems customizing and performance tuning their software.
- 78% said the product suffered from a "lack of user-friendliness."
- 57% said deployment took longer than planned.
- 55% said their system roll outs went over budget.
Several respondents also said they thought Siebel was an arrogant and unresponsive bunch.
The press, no great fan of Siebel, gleefully jumped all over the Nucleus report, giving it widespread coverage in every major print publication and Internet site devoted to software and IT issues. The report also appeared and was discussed on several business-oriented TV shows.
Siebel's response was an almost textbook example of ham-handed spin control. The company first proclaimed the survey was "random" in nature. This argument was unconvincing since the customers surveyed at "random" were presumably Siebel's best accounts. The point made by Rebecca Wettemann, vice president of research at Nucleus, who said, "If their success stories are having a difficult experience, what does that tell you about the broader population of Siebel customers?" was never convincingly refuted by Siebel.
The company then hired a research firm, Satemetrix, to conduct its own study of the Siebel customer base. Not surprisingly, Satemetrix announced that:
- Siebel had 90%+ percent customer satisfaction.
- Siebel had nearly 100% customer loyalty.
- Siebel's customers did not regard Siebel as an arrogant and unresponsive company.
Unfortunately for Siebel, skeptics and Nucleus immediately pointed out that Siebel was a minority owner of Satemetrix, the study had not allowed respondents to answer survey questions anonymously (unlike the Nucleus study), the loyalty question was designed to force a "loyal" response, and the satisfaction and loyalty percentages cited for Siebel were suspiciously close to the numbers Saddam Hussein polled before the war in Iraq.
CEO Tom Siebel compounded matters further by giving a clumsy interview with ComputerWorld in which he stated that "a number of these customers who were quoted in there are pretty upset that the comments were misrepresented." Siebel was not, however, willing to say which of its marquis customers were "upset." He then credited Nucleus with a nice bit of "guerilla marketing." Since Nucleus, unlike Satemetrix, was an independent company, it was unclear to everyone precisely who the guerillas were.
Overhanging the entire mess was the rich irony that a company selling customer relationship software designed to help you understand your customers didn't seem to have good relationships with their customers nor understand them.
Results
Siebel's competitors wasted no time in attempting to capitalize on the controversy. PeopleSoft quickly announced it had filched a half dozen unhappy customer's away from Siebel. SalesForce.com, an ASP-based rival and the particular bete noire of Siebel in the sales automation segment of the CRM market, launched a well-publicized special promotion designed to entice Siebel customers to jump ship. The entire episode now serves as a textbook example of how not handle a PR fiasco.
Lessons
Many years ago an interesting ad campaign ran on TV which depicted a weary CEO looking at his assembled management team and announcing that a major customer had just "fired" the company on the grounds that their customers no longer "knew" who they (the company) was. In the ad, instead of hiring a research firm to prove that the customer didn't know what he was talking about, the CEO handed out plane tickets to his staff with orders to go on the road and reconnect with their clients.
This ad exemplified the approach Siebel should have taken to the Nucleus report. Siebel should have:
Thanked Nucleus for bringing these problems to their attention.
- Announced the company was putting together a task force to remedy the problems the Nucleus' report had uncovered.
- Visited every reference account to ensure the task force's objectives were completely understood and explained (and made no attempt to isolate the "unhappy 23"). The truth is Siebel's sales force probably knew almost precisely who was unhappy with their software.
- Developed a proactive campaign of managing post-sales accounts so as to ensure ongoing customer satisfaction.
- Developed a timeline of steps the company was taking and goals that would be achieved, and then made sure the timeline was widely distributed among the press and the analysts.
Had Siebel followed this course, they would still have been inevitably embarrassed by the Nucleus revelations, but the focus of the story would have quickly shifted. Instead of the press enjoying the sight of Siebel engaging in a fruitless argument with Nucleus and, by extension, its own customers, the story would have turned, over time, into an ongoing examination about how Siebel was learning from its mistakes and ensuring its customer's satisfaction. The use of the timeline would have enabled the company to shape the story to match the normal journalist desire to cover events that encompass a conflict, hero, climax, and happy ending.
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